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106. Telegram From Secretary of State Rogers to the Department of State1

Secto 16/3085. Memorandum of Conversation: Foreign Secretary Sharp, (Canada), Part I of V: US economic measures, October 1, 1971: 4:30 P.M. Waldorf.

1. Participants: Canada—Foreign Secretary Sharp, Ambassador Cadieux, Mr. Goldschlag, Mr. Taylor; US—The Secretary, Mr. DePalma, Mr. Fessenden, Mr. Waring (reporting officer).

2. Summary: Canadian Foreign Secretary Sharp made very strong statement on US economic measures.2 Canada was extremely disturbed. These measures constituted an ominous package. Mortal blow struck. Canada reviewing long-run foreign policy; which has up to now been based on stable trade relations with US. Method by which US had put through measures made matters even worse. Canada forced to take measures to maintain employment. If US responded with countervailing action, such a move would be very badly interpreted. Secretary assured Sharp of our desire to continue our close relationship with Canada and to work out mutual problems in a satisfactory manner. End summary.

3. Foreign Secretary Sharp informed the Secretary that Canada was extremely disturbed by the economic measures taken by the US. These measures constituted an ominous package. A mortal blow had been struck at the economy of Canada. The situation was so serious that a special group under his chairmanship had been set up to review long-run Canadian foreign policy, which, up to now, had been based on stable trade relations with the US. This basic assumption, it appeared, no longer existed. Canada was affected not merely by the surcharge, but the DISC and the investment tax credit were more serious. Eighty-three percent of Canada’s trade was with the US. $2.5 billion of Canada’s industrial trade with the US was affected. In a sense, the temporary aspect of the measures made matters worse, as buyers were inclined to wait. There was a grave danger to employment.

4. To make matters worse, Sharp continued, the manner in which the US put through its measures was very disturbing. Canada felt it could have expected some sort of appropriate consultation. When talks [Page 414]about the situation did take place subsequently, the Canadian representatives were informed that Canada should concentrate on raw materials, rather than manufactures. This sort of language was unacceptable.

5. Regarding the last mentioned item, the Secretary assured Mr. Sharp that this was certainly not the policy of the US Government. As for the economic measures, the President felt he had to act. Indeed, there were certain inequities that resulted in the implementation of the domestic program. The Secretary said that the President and he value greatly the US’s relationship with Canada and will attempt to work toward satisfactory solutions.

6. Sharp then noted a specific way where we could be helpful. The Canadian Government had been obliged to take measures encouraging firms to retain their employees even in cases where the volume of business dropped. These measures applied to all firms whether their products were sold domestically or abroad. They were employment measures, and he hoped therefore that the US would not take any countervailing action. Such a move would be specially badly interpreted in Canada.

7. The Secretary replied that if the measures taken were unemployment measures, then countervailing action would not appear to be in order. He promised to look into the matter.

8. Sharp concluded this part of the discussion by noting that Canada had avoided retaliation so far and hoped that a satisfactory solution to outstanding problems could be found.

Rogers
  1. Source: National Archives, RG 59, Central Files 1970–73, POL 7 CAN. Confidential. Repeated to Ottawa. Rogers was attending the United Nations General Assembly session.
  2. Reference to the New Economic Policy announced by the President on August 15. For text of his statement, see Public Papers: Nixon, 1971, pp. 886–891.